Category Archives: Piercing the Monetary Veil

NB: This post is part of the “Piercing the Monetary Veil” symposium. Other contributions can be found here.

Robert Hockett–

Imagine that I incur an obligation to you – an ‘affirmative’ obligation, let’s say. Perhaps it’s through violating some ‘negative’ obligation to you, wronging you in a manner that triggers a right to redress. Perhaps it’s through promising you something. Perhaps it’s through membership in some group, the members of which are expected to ‘pay dues’ of some sort.

In virtue of this obligation, I, the ower, am now ‘liable’ on the new obligation. You, the owner, now ‘hold’ a new asset – the asset that’s my liability. Here is the start of accounting. Of shared ledgers. All accounting at bottom is obligation-accounting, justice-accounting – tracking what’s due and by whom and to whom.

Liabilities that come into existence ex nihilo – by my promising you something ‘gratuitously,’ for example – give salient rise to a two-sided danger, something a lot like the Janus-faced monetary risk of ‘inflation’ and ‘deflation.’ For one can in principle promise more than she can deliver, thereby devaluing her promises in time. Or, fearing this prospect, she can ‘not make any promises,’ thereby impoverishing her life by depriving it of the rich fabric of association and shared action that lends and brings value to life in communion with others.

Promissory inflation and deflation, through devaluation or contraction, deprive life of much of its obligatory content. And life without obligation would be life without liabilities, life without assets. It would in that sense be life without worth, without wealth, without value. It would be life without any vindicatable expectation – life without ‘rights,’ without ‘wrongs,’ without ‘right or wrong.’

How dismal that would be.

Life with real value accordingly requires, not gold (more on which below), but observance of some ‘golden mean’ – the mean between wronging and not acting, the mean between over- and under-committing. And this is as true of us in our collective capacities as it is of us in our individual capacities.

NB: This post is part of the “Piercing the Monetary Veil” symposium. Other contributions can be found here.

Raul Carrillo–

Like most advocates of Modern Monetary Theory (MMT), I didn’t embrace the paradigm because I dig late-night chats about accounting identities. Rather, I found it while pursuing economic justice (following the lead of Angela Harris, Emma Coleman Jordan, and other allies). Today, I fight financial predators — banks, landlords, debt collectors, and agencies engaged in racialized wealth extraction — on the daily. And so, my MMT enthusiasm remains…practical.

As elites literally claim human survival is “too expensive”, it’s crucial for movements to absorb this symposium’s chief insight: money itself, although not always starkly a creature of the “state”, is a creature of law, just like the institutions through which it flows.

When we analyze money as public software, rather than private hardware, we see political economy differently. For example, as Harris argues, any movement for economic justice must overcome the toxic trope of the “undeserving benefit recipient” (and the corollary trope of the put-upon khaki-clad patriarch). In my view, MMT helps us challenge this divide-and-conquer strategy, by undermining the technical premises of “taxpayer citizenship” — the racialized and gendered notion that rights should correspond to one’s nominal contributions to government coffers. When Stephanie Kelton reminds us that “money doesn’t grow on rich people”, she is making an inference LPE readers should appreciate: the wealthy do not get their money by generating it, but by mastering a system that routes tradeable legal claims on real resources that we collectively produce (i.e. “money”) to themselves. As I’ve emphasized, the coercion Robert Lee Hale described leads the rest of us not merely to work, but to work for legal tender, which can settle debts between individuals, but must satisfy debts to the state (most notably, taxes).

NB: This post is part of the “Piercing the Monetary Veil” symposium. Other contributions can be found here.

Martha T. McCluskey–

Basic legal ideas about taxation stand in the way of proposals for ambitious fiscal policies to address pervasive economic insecurity among both middle class and lower income households.

The conventional legal framework posits two primary functions for taxation. First, taxes raise revenue to finance government goods and services. Second, taxes redistribute resources, transferring money from some private interests to others based on ideas about distributional equity. Taxes also regulate private economic behavior, but this third function is generally treated as supplementary and subordinate, with economic ordering mainly directed by basic legal rules and the administrative state.

This seemingly benign conceptual frame implicitly locates economic productivity in a distinct and underlying private market sphere, with government taxing and spending cast as taking value from those who have created it. From this starting point, households can receive public support either as beneficiaries of forced public charity or as responsible consumers willing and able to pay an equivalent amount in taxes. If progressive taxing and spending programs are construed as involuntary, inherently inefficient, transfers of money from productive market winners to support less capable market losers, then that public support will tend to appear to generally inscribe rather than relieve conditions of precarity and powerlessness.

This conventional frame obscures how taxation creates money as a means for generating and distributing economic power and insecurity. Tax theory tends to ignore how law constructs and governs money, treating money as a neutral measure of social contribution.

NB: This post is part of the “Piercing the Monetary Veil” symposium. Other contributions can be found here.

Donatella Alessandrini —

Even amongst critical scholars, there is a tendency to treat international regulation of money and finance as “strictly economic”, distinct from the “social” domains of labor, the environment, and socio-economic rights. This conceptual separation cedes the realm of finance to the “neutral” neoliberal technocracy while occluding interrelationships between finance, production, and social reproduction. Placing social reproduction at the center of our analysis forces us to overcome these false dichotomies and confront finance’s role in the shaping of the “social”.

NB: This post is part of the “Piercing the Monetary Veil” symposium. Other contributions can be found here.

Lua Yuille and Rohan Grey —

Money and property law are mutually constitutive. Property rights are defined and valued in terms of their relationship to monetary instruments, while whether something counts as a monetary instrument for this or that purpose is itself a result of bundling property rights a certain way. Yet property law treats money as opaque: a neutral measuring stick that happens to prove useful in the process of doing the real work of property.* This is partly because money is grossly under-theorized and misunderstood by property law scholars. In property law, “money provides the unit in which prices appear, supplies a medium of exchange, and acts as a store of value”, but it does so as if by magic. Unlike students of economics, who are introduced to money through the self-consciously ahistorical fable that money evolved as an evolutionary response to the inefficiency and inadequacy of barter, American law students are not formally introduced to money at all. Money is taken as an idea that needs no articulation or unpacking. The result is a ‘functional monetary illiteracy’ that fails to conceptualize the complicated relationship between money and property law, serving to obscure the role of the state and of private power in defining each.**

NB: This post is part of the “Piercing the Monetary Veil” symposium. Other contributions can be found here.

Roy Kreitner —

Legal realists and their heirs made it into a truism: law is constantly entangled in value judgment. The statement is typically aimed at undermining one sense of the claim that law and legal judgment are or even could be neutral, value-free. But that is no the full extent of the realist point.

Beyond the issue of neutrality lies the question of how law constitutes value in the first place. It is not just that legal decisionmaking necessitates underlying values, it is that legal decisions shape the process of attributing, assigning, or creating value. Of course, there are multiple modes of valuation, and some are (thankfully) quite distant from the law (think friendship). But modern market societies overwhelmingly value resources, goods, services, and benefits of almost every stripe through money, and money is made of law. This may seem a simple point, but exploring its implications should disorient—and perhaps reorient—how we think about the relationship between law, values, and markets.

NB: This post is part of the “Piercing the Monetary Veil” symposium. Other contributions can be found here.

Christine Desan —

In 2017, the Federal Reserve Bank of New York published a comic book on the origins of money. The story, called “Once Upon a Dime,” unspools sweetly. Far far away, on the planet Novus, a community of good-willed humanoids live together, trading what they have for what they need – mustard for fish, wheels for cakes. In good time, the inconveniences of barter push them to innovate. All agree to give and take artfully carved river stones as money. That eases their trade; they can “Do It More Efficiently” (thus the “dime”) and the little community prospers. People soon warehouse their rocks with a caretaker, who begins allowing customers to transfer rocks from one account to another by check. The caretaker also advances some of the funds he has “stored here at the bank.” Inter-bank loans follow naturally, as does a run on the banks. In the end, the group establishes a central bank to monitor the other banks and lend them money during emergencies. In short, “first money replaced barter,” then banks developed “as storehouses” and as lenders, then the group appoints a central bank to supervise the banks.

“Once Upon a Dime” does not stray from the conventional story about money. To the contrary, it reinforces the tale, teaching it at a primary level and in living color. That makes the comic all the more arresting: it makes a constitutional argument about the nature of money and its place in society even as it deflects attention by casting the medium as a mechanical fix for a private problem.

Consider, first, the way the comic locates money firmly within the sphere of individual choice as opposed to the political will: money is the product of entrepreneurial initiative (the proposal to use rocks as a medium), adopted by social acclaim (convention as opposed to public authority), and targeted at a technical problem (awkward exchange). Distribution is assumed; the river rocks somehow spread around society. Banks evolve from a storage mechanism, a phenomenon of convenience more than credit. As for credit, it simply shifts resources, rather than creating new value, a service like any other. The central bank is only ambiguously “public,” an institution that will enforce self-evident standards of practice and provide occasional rescue.

Consider, in turn, the way the narrative diverts our attention as lawyers. By locating money as an inert medium and banks as the mechanism that pools and shifts the medium, the story asserts them only and emphatically as technologies of exchange. Public authority surfaces only as a coordinating mechanism, occasioned to resolve a predictable collision of individual demand. If money operates on earth as it operates on Novus, there is really nothing much for us to see.

NB: This post is part of the “Piercing the Monetary Veil” symposium. Other contributions can be found here.

Luke Herrine —

This blog has already hostedseveralexamplesofre-thinkings of the nature of money and its relationship to law and power, most recently in a symposium on LPE Contributor Mehrsa Baradaran’s book on money and Black capitalism. This may seem like a niche project that those without an interest in finance can afford to ignore or leave to others. But that would be to ignore a fundamental principle: cash rules everything around us. Especially in capitalist societies, power is channeled through money and vice versa.

And justifications of power rely on mystification about money. If anything can be called the core of the neoliberal project it is the proposition that cash should rule us. Hayek’s foundational argument, after all, is that allocation via the price mechanism is the essence self governance. Making all resources and activities interchangeable with money enables each person to pursue her own version of the good life in a way that interferes with others’ only as much as they consent to while simultaneously directing resources towards their most valuable use (see here for instance). Payment of money is how we each individually express how much we value different resources and how much of others’ interference we are willing to bear. Price is the aggregation of those individual valuations. Money thus serves as the common currency that enables us to commensurate our processes of valuation without deliberating and without forcing anything on anybody else.

But that’s not how money works. Treating money as a neutral arbiter of values that the legal system can simply take for granted is a classic example of “transcendental nonsense“. As with any form of such nonsense, explaining why requires a careful analysis of how law structures money, tracing who has the power to shape that law, and exploring the dialectic relationship between the law, money, and the markets they coordinate. A small but growing group of scholars has been undertaking this task. Many of these scholars have begun to converge in a new international network called the Law and Money Initiative. An overlapping group will also be launching a new site at just-money.org.

Over the next two weeks, we will host a symposium on how close attention to the role of money in law and political economy changes one’s analysis of a whole range of areas of society, with a particular focus on how the legal infrastructure of money shapes areas of non-financial law. The idea is to open up conversations about how power shapes law to conversations about how money and law shape each other, and vice versa.

Join us!

Luke Herrine is a PhD Student at Yale Law School.

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